I am Forbes' Opinion Editor. I am a Senior Fellow at the Manhattan Institute for Policy Research, and the author of How Medicaid Fails the Poor (Encounter, 2013). In 2012, I served as a health care policy advisor to Mitt Romney. To contact me, click here. To receive a weekly e-mail digest of articles from The Apothecary, sign up here, or you can subscribe to The Apothecary’s RSS feed or my Twitter feed. In addition to my Forbes blog, I write on health care, fiscal matters, finance, and other policy issues for National Review. My work has also appeared in National Affairs, USA Today, The Atlantic, and other publications. I've appeared on television, including on MSNBC, CNBC, HBO, Fox News, and Fox Business. For an archive of my writing prior to February 2011, please visit avikroy.net. Professionally, I'm the founder of Roy Healthcare Research, an investment and policy research firm. In this role, I serve as a paid advisor to health care investors and industry stakeholders. Previously, I worked as an analyst and portfolio manager at J.P. Morgan, Bain Capital, and other firms.

“If Obamacare is overturned, and Obama is defeated, who will win the Democratic party’s next fight over health care? Probably not the folks counseling compromise,” Ezra Klein wrote on Monday. “Too many Democrats have seen how that goes.” Ezra’s frustration is shared by many on the Left. But is he right? Were Republicans to blame for the failure to achieve bipartisan health-care reform? Would Democrats really reject a proposal from a Republican President that dramatically expanded health insurance coverage? A review of the facts makes clear that the answer to the first question is “no.” As to the second, we’ll see.

Ezra says, in response to my piece describing prior liberal antagonism to the individual mandate, that yes, liberals flip-flopped on the mandate, but their reason for doing so was a noble one. “Many liberals opposed such a shift. But they lost to the factions in the party that wanted health-care reform to be a bipartisan endeavor…The Democrats changed their mind in order to secure a bipartisan compromise on health-care reform. Republicans changed their mind in order to prevent one.” Let’s examine those claims.

Most conservative health wonks have consistently opposed the individual mandate

I’ve tried my best to explain that most conservative opposition to the mandate is not driven by partisan hypocrisy. Here is Michael Tanner of the Cato Institute in 2006, well before anyone was worried about Obamacare: “An individual mandate crosses an important line…it opens the door to widespread…political interference in personal health care decisions.” Grace-Marie Turner of the Galen Institute, also in 2006: “The first concern [of the Massachusetts health plan] is the requirement that every individual in the state must purchase health insurance or face financial penalties.”

Ramesh Ponnuru in National Review, the same year: “The commonwealth’s plan that is most controversial on the Right—which is to say, its most controversial feature, the plan having inspired opposition from much of the Right while mostly winning support from the Left: the mandate that all individuals purchase health insurance.” Says Ilya Somin,

I was a college student intern at Heritage back in 1994, not long after the political battle over Bill Clinton’s health care plan. Although I didn’t work on health care policy myself, I well remember the ongoing war of words between Heritage and the libertarian Cato Institute over the Heritage individual mandate plan, which Cato opposed. So too did leading free market health care and entitlement experts such as John Goodman and Peter Ferrara.

I could go on and on and on—and have. Let me be as clear as I can be on this point: the idea that Obamacare was designed by magnanimous Democrats, as a way to be nice to Republicans, is bunk. Instead, Obamacare was designed to please both left-wing and centrist factions within the Democratic Party.

Liberal commentators are fantasizing when they argue that a state-based approach to universal coverage, like the one in Massachusetts, would have been palatable to conservatives at the national level. Allow me to explain.

If you’re a governor, and you’re trying to improve your health care system, you are severely constrained by federal programs and federal laws. You can’t do much to reform Medicaid. Medicare dominates the system. The employer tax exclusion unnecessarily ties health insurance to employment, and creates the pre-existing condition problem.

Hence, a state-based approach to universal coverage must, by necessity, work within the federal constraints of Medicare, Medicaid, the employer tax exclusion, and myriad federal regulations. That’s why few governors—Republican or Democratic—have made any headway on the issue.

Indeed, a big part of the appeal for Democrats of adapting Massachusetts’ reforms to the federal level was that doing so required no structural changes to the three big federal entitlements.

But adding on new federal health-care entitlements, without fixing the existing ones, was reckless from a policy standpoint. Any serious federal approach to health-care reform must tackle runaway spending in Medicare and Medicaid, and reform federal laws—especially the employer tax exclusion—in order to make the insurance market more efficient.

There was a path to bipartisan reform, but Democrats rejected it

Hence, a bipartisan health-care agenda at the federal level will necessarily look quite different than one at the state level. If liberals had bothered to ask, they could easily have elicited bipartisan support for a proposal that did the following: (1) set up the Obamacare exchanges for those under 400% of FPL; (2) applied the Ryan reforms to Medicare and Medicaid (or, alternatively, folded in Medicare and Medicaid acute-care into the PPACA exchanges); (3) equalized the tax treatment of employer-sponsored and individually-purchased insurance; and (4) not increase taxes or the deficit.

But they didn’t. The Democratically-controlled House passed its plan in 2009 with nearly zero Republican input. In the Senate, the Gang of Six—Democratic Sens. Baucus (Mont.), Conrad (N.D.), and Bingaman (N.M.), and Republican Sens. Grassley (Iowa), Snowe (Maine), and Enzi (Wyo.)—failed to come to an agreement because the Republicans were concerned about the bill’s dramatic increase in taxes and spending.

Indeed, Democrats wouldn’t even have needed to do everything I listed above. Simply expanding coverage without raising taxes would have been enough, as contemporaneous reporting makes clear. But the Democratic leadership had no interest in a bipartisan deal.

Universal-coverage activist John McDonough, in his book Inside National Health Reform, recounts that Max Baucus’ original November 2008 blueprint for health reform “had made known [Baucus’] intention to use changes in the tax treatment of health insurance as his major financing source to pay for reform.” As Baucus put it in his blueprint, “It is time to explore ways in which tax incentives can be modified to distribute benefits more fairly and effectively…This could be done by limiting or capping the tax exclusion based on the value of health benefits, or as an alternative, based on a person’s income—or both.” A salutary idea.

But the President, and Senate Majority Leader Harry Reid (D., Nev.) were having none of that. As Roll Callreported at the time, “According to Democratic sources, Reid told Baucus that taxing health benefits and failing to include a strong government-run insurance option of some sort in his bill would cost 10 to 15 Democratic votes; Reid told Baucus it wasn’t worth securing [Republican] support.”

McDonough, who was on the inside during these discussions, notes that Democratic leaders felt that it was unnecessary to solicit Republican support because Democrats had 60 votes in the Senate. “Reid’s directive, backed by the White House and supported by the House, was motivated in part by the seating of Minnesota’s Al Franken, the Democrats’ elusive sixtieth vote, meaning that Republicans were no longer needed to pass a bill. This directive, though, left Baucus’s plan with a gaping financial hole.”

Democrats, unwilling to budge on broader reform, then tried to ram through a partisan expansion of coverage, with substantial tax increases and an individual mandate, and zero structural reform to Medicare, Medicaid, and the employer tax exclusion. They got what they wanted. But blaming Republican intransigence for this outcome is myth-making, pure and simple. The blame goes to left-wing Democrats, who refused to entertain a more balanced approach to health reform.

Put simply, liberals’ principal goal was and is universal coverage, and conservatives’ principal goal was and is entitlement reform. These two goals could have been simultaneously accomplished in a bipartisan bill, but liberals had no desire to reform entitlements.

If Obamacare goes down, what next?

Many liberals believe that if Obamacare goes down, we’ll have to wait another 20 years for a serious attempt at health reform. That view is too pessimistic. Republican policy leaders, today, understand the critical importance of broader health reform in tackling the federal deficit.

So, here is the trillion-dollar question for Ezra and his thoughtful colleagues on the progressive side. If a President Romney were to propose a dramatic expansion of coverage along the Ryan lines—universal tax credits for the purchase of private health insurance, paid for with reform of Medicare, Medicaid, and the employer tax exclusion—would they attempt to destroy it, out of partisan spite? If so, they’re not as dedicated to universal coverage as they claim to be.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.

Comments

No amount of health care reform will lower costs as long as insurance companies are allowed to run the show. Universal coverage is not the same as a single-payer plan. And it’s not just the insurance companies profits that raise costs. The administrative burden of our current health care industry is enormous.

My doctors’ practice has 6 doctors, 2 nurses, 2 receptionists, and 8 full-time and 2 part-time billers. Those billers are necessary to deal with insurance companies and their thousands of medical plans. Under a single-payer system, they’d only need 2 full-time and 1-part time billers. The cost for those 6 full-time and 1 part-time billers, including benefits like health insurance, is approximately $360,000/year. That’s $60,000 per doctor per year. The practice recoups their costs how? By raising rates of course. Same with hospitals, laboratories, radiologist and every other medical practitioner who must also hire ridiculously large numbers of billers to deal with the complexity and sheer volume of work generated by those insurance companies and their insane number of plans.

Health insurance is economically not well suited for the market; it is inherently best run as a government program. Why? Three big reasons:

1.) Because the financial incentive for the supplier is to NOT provide benefit to the customer.

2.) Insurance obscures the pricing mechanism that drives market behavior. Who goes to the hospital having shopped a menu of prices?

3.) The very nature of the benefit of insurance is to spread risk across as broad a population as possible. This is done best in a singer payer system. Competition actually reduces the effectiveness by shrinking the population across which the risk is distributed, increasing cost and volatility.

The government does not have a ‘financial incentive’ although you obviously are referring to members of Congress: an important difference as you are referring to another issue entirely (the corruption of D.C.). That’s one of three branches of government, and (barring criminal behavior) will not affect the administration of government either.

Even if the point was on topic it only addressed one of three critical weaknesses of market based healthcare systems Mark Allen posted, and didn’t address the major point: Single payer systems are cheaper to run, and achieve objectively better results.

Nice revisionist history. Republicans at the time weren’t talking about the Ryan plans or anything but across state line sale of insurance and tort reform. As was clear from the health care reform summit, Obama was desperate to get Republicans to move in his direction on number of people covered. But Republicans had ZERO interest in that. They had the choice between engaging in real reform and getting a club to wield, they chose the club. You’re right that the mandate was about Democrats compromising with Democrats. But that’s simply because Republican votes were never on the table after the Gang of Six disintegrated with Grassley backsliding with the Pull the Plug on Grandma nonsense.

There was no dance partner for reform once the TEA Party became a threat to Republican moderates.

Right, but that proceeds from the assumption that those green-teethed, Tea Party rubes sitting opposite from the President weren’t actually concerned about the potential budgetary costs of HCR as it was being bandied about at the time.

Remember, Ryan and his people had already had to deal with TARP and the Stimulus Bill, plus the Auto Bailout. I think that simply to dismiss Republican concerns about costs, especially in the wake of increasing conservative dislike of Bush and his spending, misses the mark.

Rewriting history? Well no matter. The bottom line is that you can’t replace Medicare with tax credits because the tax credits will simply not keep up with the cost of health insurance. Now, a Medicare recipient can purchase a low-cost supplement, and between Medicare and the supplement, pay no out-of-pocket costs for medical care (dental, vision and prescriptions nonwithstanding). Elderly on fixed incomes can afford health care under this system. Under the Republicans plan, you would expose elderly to two risks (1) the risk that the credit would be inadequate now or in the future; and (2) the extra out-of-pocket costs that the elderly would incur in the form of deductibles and co-payments. The tax credit/voucher system proposed by Ryan would essentially be useless at the point that the elderly insured’s share of the premium exceeded their capacity to pay it. Of course that would solve two major problems (1) a reduction in the deficit when the vouchers are not used; and (2) elimination of our aging boomer problem. I guess the real questions is how much do we value the lives of our senior citizens.